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Greenberg: Reading the Fine Print in Best Buy’s Guidance

Guidance is the ultimate game of connecting the dots to get the real picture.

Oliver Quillia for cnbc.com

Just look at Best Buy.

On Tuesday the company cut guidance for fiscal 2011 to a range of $3.20 to $3.40 a share. Very important to note: That includes 12 cents from year-to-date share repurchases.

Why care?

It suggests the company, which bought no shares in 2010 or 2009, has been pulling levers all year to make itself look better than it really is. And with this latest cut in guidance, after subtracting out the benefit from share buybacks, it would appear Best Buy is actually far worse off than it was in March when it set its original 2011 guidance.

That guidance of $3.45 to $3.60 a share, the company was quick to point out, was a 10 percent to 14 percent increase over the prior year (dot No. 1). Best Buy made a point of saying that guidance (and this is critical to remember) didn’t include any impact from “potential” share repurchases.

When the first fiscal quarter was reported in June, the company merely reaffirmed guidance (second dot.)

Enter the second quarter (third dot) Best Buy boosted guidance by 10 cents a share to $3.55 to $3.70 a share. But (and here’s where it gets interesting) the company said that revised guidance included a “10-cent favorable impact” from share repurchases. In other words, if it weren’t for pulling the lever of share repurchases, there would have been no increase in guidance. (Didn’t matter because investors loved the news and the stock soared.)

Which gets us to the final dot: Tuesday’s slicing of guidance to $3.20 to $3.40 a share, which includes the 12 cents from share repurchases. Take out the share repurchases and the real guidance is $3.08 to $3.28 a share, or a mere 3 percent gain from last year based on the midpoint of the range. Hardly what you would call growth.

My take: Yet another reminder of why the numbers these companies give aren’t always all they’re cracked up to be.

Questions? Comments? Write to HerbOnTheStreet@cnbc.com

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